Advisor Excited for Potential Ban on Noncompete Agreements: "I'd be the First Person to Start Working Again"

When certified financial planner Ted Jenkin sold his financial advisory practice in 2019, he signed a nonsolicit and noncompete agreement that prohibited him from taking clients from the firm for five years. He also agreed not to take any other job in the financial industry during that time.
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"When you sell a business, you are selling clients or ideas, but if you can't do the work in this business, it makes no sense whatsoever," he said. "It's insane."
Jenkin, who was a member of CNBC's Financial Advisor Council, was bound by this clause to stay on as an employee until the end of last year.
"Now I can either comply with the contract or do something in the industry and we'll have a legal battle," he said.
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According to Personal Finance, the proposed ban on noncompete clauses could mean more opportunities for workers. Experts say that now is a good time to make three key money moves: save more, invest in yourself, and negotiate for higher pay. If you want to earn more, your chances may be better than ever.
A federal regulatory agency may have something to say about that.
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The U.S. Federal Trade Commission has proposed a new rule that would ban the use of noncompete clauses in employee contracts. The agency said that noncompete clauses suppress wages, hamper innovation and prevent entrepreneurs from starting new businesses.
The proposed rule would require companies with existing noncompete agreements to rescind them and inform current and past employees that they have been canceled. This would free Jenkin to pursue other employment.
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Jenkin said that she would be the first person to start working again if the law allowed it. She said that she wouldn't have to worry about getting into a legal battle just because she was working in her profession.
Noncompetes are increasingly being used in a wide range of occupations, from hairstylists and warehouse workers to doctors and business executives, according to the FTC.
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According to the National Employment Law Project, most workers have little ability to negotiate non-compete clauses, and 93% of them read and sign them anyway.
It is estimated that more than 30 million workers in the United States are bound by non-compete agreements. This represents approximately 18% of the workforce.
"Noncompetes block workers from freely switching jobs, which can deprive them of higher wages and better working conditions," FTC Chair Lina Khan said in a statement. "This can also deprive businesses of a talent pool that they need to build and expand."
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If companies stopped using non-compete clauses, wages could increase by nearly $300 billion a year, according to the Federal Trade Commission.
Although the proposed regulation has not yet gone into effect, labor and employment attorney Michael Schmidt of Cozen O'Connor in New York believes that it will eventually face "inevitable litigation" challenging the FTC's authority.
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"Banning noncompete clauses in all employment circumstances would overturn well-established state laws and ignore the fact that, when used appropriately, noncompete agreements can foster innovation and preserve competition," said Sean Heather, the U.S. Chamber of Commerce's senior vice president for international regulatory affairs and antitrust.
Heather said that an outright ban is "blatantly unlawful." She explained that Congress has never delegated the FTC anything close to the authority it would need to promulgate such a competition rule.
If the rulemaking process gets tied up in the court system, it could take up to a year or even longer, according to Schmidt.